MARKET REVIEW

Global. Despite hopes of a diplomatic solution to avoid a Russian invasion of Ukraine, Asian markets ended mostly lower as sentiment was undermined by an extended rout in Wall St amid lingering concerns over protracted Russia-Ukraine geopolitical fallout and the likely path for Fed’s upcoming rate hikes and balance sheet reduction. In the run-up to the Presidents' Day holiday on 21 Feb and the expiration of options, the Dow fell 232 pts in a choppy session last Friday after rising as much as 111 pts whilst the US10Y yield eased 0.03% to 1.93%, marked by worries about the Fed’s next policy steps and heightened Russia-Ukraine confrontation (Biden said the US believes that Putin has decided to carry out an attack on Ukraine “in the coming days”).

Malaysia. After surging 75 pts in the past seven straight days to 1605 on Thursday, KLCI eased 2 pts to 1603, in line with overnight rout from Wall St. Market breadth was negative as losers edged gainers by 510 to 477. In terms of funds flow, local institutions recorded their net outflows for the 11th straight session with trades of RM220m (Feb MTD: - RM1.55bn; Jan: -RM418m). This was matched by net buying via foreign institutions (Feb MTD: +RM1.68bn; Jan: +RM332m) and retailers (Feb MTD: -RM126m; Jan: +85m) amounting to RM179m and RM40m, respectively.

TECHNICAL OUTLOOK: KLCI

After surging 75 pts in the past seven straight days and 102 pts from YTD low 1503, KLCI eased 2 pts at 1603 last Friday. Together with the formation of a spinning top and Doji candlesticks as well as toppish indicators, the benchmark is ripe for further healthy consolidation, with key supports situated at 1546-1560-1570 levels. On the topside, we expect the resistances at 1613-1623 to cap gains until the market digests the grossly overbought readings.

MARKET OUTLOOK

In the wake of extended slide in Wall St, toppish indicators (after rallying 100 pts from YTD low 1503), hawkish Fed, heightened geopolitical conflict in Ukraine, soaring Omicron wave in Malaysia and ongoing Feb reporting season, we should see profit taking capping KLCI near-term upside (resistances: 1613-1623). On downside support, the benchmark is likely to be cushioned near 1546-1560-1570 levels, underpinned by aggressive economic reopening activities, high vaccination rates, elevated FCPO and oil prices, and the NSC’s proposals for border reopening on 1 Mar.

VIRTUAL PORTFOLIO POSITION-FIG1

Tracking the Nasdaq’s rout overnight, we squared off PENTA (5.9% loss) after hitting cut loss levels.

Source: Hong Leong Investment Bank Research - 21 Feb 2022